Borgwarner Inc. · NYSE:BWA
Borgwarner — Investor Presentation (September 2021)
37 slides from Borgwarner's investor presentation, September 2021
Slide 1: Charging Forward: Investor Presentation Q3 2021
Charging Forward Investor Presentation Q3 2021 1
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation may contain forward-looking statements as contemplated by the 1995 Private Securities Litigation Reform Act that are based on management’s current outlook, expectations, estimates and projections. Words such as “anticipates,” “believes,” “continues,” “cou
Slide 3: Non-GAAP Financial Measures
Non-GAAP Financial Measures This presentation contains information about BorgWarner’s financial results that is not presented in accordance with accounting principles generally accepted in the United States (“GAAP”). Such non-GAAP financial measures are reconciled to their closest GAAP financial mea
Slide 4: Intentional Growth for a Sustainable Future
Intentional Growth for a Sustainable Future Revenue from EVs • Our accelerated electrification strategy is a product of our vision and long-term focus <3%1 ~45% • Our vision of a clean, energy- efficient world is as relevant today as ever • More aggressively deploying our organic investments and cap
Slide 5: BorgWarner Is Evolving Its Mission Today and Tomorrow
BorgWarner Is Evolving Its Mission Today and Tomorrow Our mission was focused on balance: We’re accelerating Propulsion System Leader toward electrification for Combustion, Hybrid and Electric Vehicles We deliver innovative and sustainable mobility solutions for the vehicle market 5
Slide 6: This Evolution Is Consistent with Our Commitment to Sustainability
This Evolution Is Consistent with Our Commitment to Sustainability GHG: 50% Reduction by 2030 tCO2e / $M sales Committed to being 50 40.9 Baseline 40 30 32.0 Progress as of 2019 Goal 20.5 CARBON NEUTRAL 20 2015 2018 2021 2024 2027 2030 by 2035 Energy: 37% Reduction by 2030 Our sustainability objecti
Slide 7: We Empower Our Diverse Teams
Local Accountability Global Strength Gender Diversity Gender Pay Overall New Hires Parity1 33.2% 25.6% 98.7% Leadership 14.6% WeEmpower We Empower Our Our Diverse DiverseTeams Teams Minorities (USA) Overall 21.2% New Hires 24.7% Leadership 13.9% 1 This study was facilitated by Mercer on behalf of Bo
Slide 8: Rising Temperatures Drive Demand for Clean, Efficient Vehicles
Rising Temperatures Drive Demand for Clean, Efficient Vehicles External Factors Global Surface Temperature Anomalies – 5-year average 1 Are Accelerating Degrees Celsius 0.4 Demand for Cleaner, -0.2 More Efficient -0.8 1880 1900 1920 1940 1960 1980 2000 2020 NASA figure adapted from Goddard Institute
Slide 9: We've Grown Our Electrification Portfolio Deliberately over Time
We’ve Grown Our Electrification Portfolio Deliberately over Time Rotating electric Est. 2025 Content Opportunity per eLV 2015 (i.e., motors) $2,640 2016 Industrial-focused power electronics 2017 Electronics for start- $1,614 Delphi/Sevcon Acquisitions up EV customers — Power Electronics 2018 Battery
Slide 10: Electric Vehicles (% Sales)
Electric Vehicles (% Sales) ~45% >25% <3% 2021¹ 2025 2030 1 Estimate at the midpoint of FY21 guidance Source: BorgWarner estimate 10
Slide 11: eLV Market Expected to Experience Profound Growth Over Next Decade
eLV Market eLV Addressable Market Expected to ~$76B eHeater/Other1 15% Experience CAGR Profound Growth Power 35% Electronics2 Over Next Decade CAGR ~$38B BorgWarner has positioned itself to ~$11B Motor+Gear3 capitalize on this growth 2021 2025 2030 EV Market Penetration 5% 15% 30% 1 Includes high-vo
Slide 12: We're Well Positioned to Seize eLV Market Opportunity
We’re Well Positioned to Seize eLV Market Opportunity Est. 2025 BorgWarner Combustion Based Electric Content Opportunity Per ~2.9X Combustion $$ Light Vehicle Summary Hybrid $2,640 Combustion $1,875 $907 Addressable Market $100B $38B Sources: BorgWarner TAM; IHS Markit, KGP. Excludes: Romeo Power Ba
Slide 13: Electric Component Vehicle Sourcing
Electric Component Vehicle Sourcing Electric Drive Motor Gearbox 42% 34% 2025 Addressable 2025 Addressable outsourced market: outsourced market: 58% $4.2B in 2025 66% $1.9B in 2025 OEM In-House Suppliers OEM In-House Suppliers On-Board Charger, DC-DC Converter & Inverter Battery Pack Controller 18%
Slide 14: 2025 EV Addressable Market Breakdown
2025 EV Addressable Market Breakdown Outsourced $ in billions Other Power ▪ Power Electronics outsourcing strong Electronics $9.7 increasing trend Other (eHeating and Other Electronics) ▪ Motor outsourcing relatively flat $2.7 through 2025 Outsourced Inverter ▪ Sub-components insourced market $8.8 r
Slide 15: Recent Awards Across EV Product Portfolio
Recent Awards Across EV Product Portfolio 800-Volt Inverter 800-volt Electric Motor 400-Volt Inverter High Voltage Coolant Heater ▪ with premium European OEM ▪ with large global commercial ▪ with major European OEM on ▪ with major European premium on next-generation BEVs vehicle EV customer launchin
Slide 16: Key European Inverter Wins Provide Scale
Key European Inverter Wins Provide Scale BorgWarner Competitive Advantage Inverters for 3 Key European OEM Programs ▪ Efficient speed to market with products ~1.1M covering 400V SiC, 800V SiC, 48V ▪ Proprietary inverter power module design ▪ Vertical integration ▪ Power modules, integrated circuit d
Slide 17: Recently Launched Geely Award Adds Scale to High-voltage Coolant Heater Product Line
Recently Launched Geely Award Adds Scale to High- voltage Coolant Heater Product Line Estimated Annual High-voltage Coolant Heater Volumes ~4M Product Highlights ▪ Enables improved battery performance, longer range and comfortable cabin climate ~600K ▪ 400V and 800V capabilities with awarded busines
Slide 18: We're Prepared to Profitably Scale eLV and Accelerate Expansion
We’re Prepared to Profitably Scale eLV and Accelerate Expansion Estimated BorgWarner eLV Revenue ~$8B Our Objectives Growth with End Markets • Deliver on organic growth initiatives • Leverage next-generation products Charging ~$3.5B and technologies Forward Initiatives • Proactively pursue inorganic
Slide 19: eCV Market Also Poised for Significant Acceleration
eCV Market Also eCV Addressable Market Poised for 13% ~$29B Forklift Significant CAGR Chargers Acceleration Rest of World 19% ~$16B Battery1 CAGR EU & North ~$8B America BorgWarner enhancing its focus in this area to participate in rapid growth Inverter2 Motor+Gear2 2021 2025 2030 EV Market Penetrat
Slide 20: …With Significant Potential for Growth
…With Significant Potential for Growth Estimated BorgWarner eCV Revenue >$2B Our Objectives Growth with End Markets • Execute organic growth plan • Explore potential partnerships or Charging >$1B collaborations for stronger move Forward into eCV market Initiatives • Complement existing portfolio thr
Slide 21: A More Focused Combustion Business
A More Focused Combustion Business Areas of Focus Combustion Portfolio Profile • Support our customers as they bridge Leading market positions to electrification Growing through 2025+ Strong margins and cash flow • Focus on technologies that interconnect with EVs and future mobility needs • Deliver
Slide 22: Clear Roadmap to Driving Sustainable Growth Through 2030
Clear Roadmap to Driving Sustainable Growth Through 2030 Estimated Organic Growth and Portfolio Realignment… …Sets Up Second Half of Decade $22B+ $2B to $3B ~$4B Growth attributable ~$18B to market mix ~$15B1 $(3B) to $(4B) ~45% of total >25% of total 2021 Organic Growth Acquisitions Dispositions 20
Slide 23: Profitability on EV Portfolio Expected to Improve as Programs Launch
Profitability on EV $700 Estimated EV Profitability Characteristics 27.0% Portfolio Expected $500 + to Improve as 17.0% Programs Launch $300 7.0% $100 Current profitability already reflects elevated R&D spending for EVs -3.0% $(100) Growth in R&D spending not Breakeven commensurate with sales trajec
Slide 24: Committed to Top-Quartile Margin Profile
Committed to Top-Quartile Margin Profile Adj. Operating Margin Performance Strong margins are part of the BorgWarner culture >11.0% • Sales growth and proactive cost Double-digit margin management sustain margin profile even with revenue mix shift ~10.4% • R&D for rapidly growing EV portfolio is ove
Slide 25: Significant Capital Available to Accelerate Positioning in EV
Significant Capital 2021-2025 Estimated Capital Flows Available to Accelerate >$7B Positioning in EV ~$1.5B Dispositions1 ~$5.5B • Strong cash flow and investment- >$1.0B Available grade balance sheet support M&A Available Leverage2 for M&A • Dispositions provide additional source of capital ~$4.5B
Slide 26: Key Takeaways
• We have both the strategies and execution capabilities to lead the industry • Sustainability is core with a commitment to carbon neutrality by 2035 • Our actions through 2025 are expected to achieve ~45% of revenue from EV by 2030, with potential for more to come 26
Slide 27: Appendix
x BorgWarner Appendix
Slide 28: Moderating 2021 Industry Expectations
Moderating 2021 Industry Expectations BorgWarner Global Market North America Europe China Q2’21 FY’21 Actual Est. Q2’21 FY’21 Q2’21 FY’21 Q2’21 FY’21 63.9% Actual Est. Actual Est. Actual Est. 127.5% 83.5% 13% to 16% (Prior Est. ~8.5% to ~11% 17% to 20%) 8% to 10% (Prior Est. (Prior Est. 9% to 12%) 9
Slide 29: 2021 Expected Sales Walk and Guidance
2021 Expected Sales Walk and Guidance $ in millions Full-year Net Sales Outlook Net Sales Highlights 2020 net sales $10,165 ▪ Organic growth of ~14% to ~17% Delphi Technologies $2,627 pro forma impact Earnings and FCF Highlights 2020 pro forma incl. 8.3% Pro forma Delphi Technologies* Adj. Operating
Slide 30: Acquisition of Leading Battery Systems Provider
Acquisition of Leading Battery Systems Provider Strengthens BorgWarner’s electric propulsion systems leadership ▪ Battery Systems is a key element of BorgWarner’s e-growth strategy ▪ AKASOL is a leader in high-performance battery system solutions for electric vehicles ▪ AKASOL has highly flexible ba
Slide 31: Global Footprint with Production-Ready Capacity
Global Footprint with Production-Ready Capacity State-of-the-art manufacturing facilities Langen Darmstadt Hazel Park Completed capacity expansion New HQ with 1 GWh of New US facility to support to support future growth installed capacity North American customers 1.0 GWH 4.7 GWH 2020 2022 Production
Slide 32: Flexible Battery Technology Across Cell Types
Flexible Battery Technology Across Cell Types Integrated battery solutions for any kind of commercial vehicle Cell Architectures Pouch Cell / POC Prismatic Cell / PRC Cylindrical Cell / CYC Cell System Highly selective process allows AKASOL to use only the top-tier quality cells Reliable and robust
Slide 33: Technology Leading Position in Energy Density
Technology Leading Position in Energy Density Ultra-High-Energy System in Gravimetric and Volumetric Energy Density Gen X (in development) Gravimetric energy density (Wh/kg) Gen 3 (Format Agnostic) (SOP: Q4 2021) Competitor #2 Competitor #4 Competitor #3 Competitor #2 Competitor #4 Competitor #3 Com
Slide 34: Pro Forma Description
Pro Forma Description On October 1, 2020 BorgWarner completed its acquisition of Delphi Technologies PLC (Delphi Technologies). The 2020 pro forma unaudited quarterly financial information included herein includes the pro forma combined results of BorgWarner and Delphi Technologies for periods prior
Slide 35: Pro Forma 2020 Quarterly Sales and Adj. Operating Income (Unaudited)
Pro Forma 2020 Quarterly Sales and Adj. Operating Income (Unaudited) Pro forma Pro forma Pro forma As Reported Pro forma Q1 2020 Q2 2020 Q3 2020 Q4 2020 FY 2020 Air Management Net sales $ 1,683 $ 961 $ 1,750 $ 1,942 $ 6,336 Adj. EBIT 241 34 278 301 854 Adj. EBIT Margin 14.3% 3.5% 15.9% 15.5% 13.5% e
Slide 36: Adjusted Operating Income and Margin Reconciliation to US GAAP
Adjusted Operating Income and Margin Reconciliation to US GAAP The Company defines adjusted operating income as operating income adjusted to eliminate the impact of restructuring expense, merger, acquisition and divestiture expense, other net expenses, discontinued operations, and other gains and lo
Slide 37: Free Cash Flow Reconciliation to US GAAP
Free Cash Flow Reconciliation to US GAAP The Company defines free cash flow as net cash provided by operating activities minus capital expenditures, including tooling outlays. The measure is useful to both management and investors in evaluating the Company’s ability to service and repay its debt. Fr